Issues Around Aging Population Demographic and Infrastructure Funding

This blog post presents Ross’ response to the other question, which reads:

Is there a formula or is research being done to assist utilities balancing aging infrastructure with the possibility that the customer base will decline? The population in our area is declining. If we plan to replace existing infrastructure, we may be overbuilding. Getting this balance correct seems very difficult.

Ross answers:

The other thing that comes on top of bulk population decline is also in a lot of areas, you have quite an aging population. So your demographic is getting older quite quickly.

The issue with that is, of course, is that when people are retired and essentially on a fixed income, they have no appetite for paying more for services because they have to make their incomes stretch for a number of years.

So if you’re coming into renewal cycle of assets, at the same time as you’ve got a community that really doesn’t have the means or they don’t want to pay for anything more, and you’re going to have to put tariffs or costs up, you’ve got a problem. And you’re going to get a lot of push back.

So one of the communities I’m dealing with at the moment is in that situation and it’s declining quite rapidly. At the moment they’re a town of, let’s say, they’re a couple of thousand people. And they have a municipal water supply which is on demand, that has fire-fighting capacity, and it is basically on-demand water to each house and a treatment system, all those sorts of things.

And the conversation we’ve just started and we’re right in the middle of an asset management plan legislated round of updates here and the conversation was starting into this plan. And it will roll on for probably a decade before we resolve it is, “Can we maintain that level of service in that town?”

And the answer, if you actually want to be really harsh about it is probably, no – particularly once we get into renewals.

Cost of infrastructure renewal issues where there is population decline

So then the question is, do you start dropping the level of service?

And so the answer is, well, if we can’t afford it, we’re going to have to at some stage.

And so that might be going in New Zealand further to what we currently have for more rural supplies out in the country – we have tanks and restricted supply. And so you’ve constant feed of so many gallons a day, with a little restriction device that constantly feeds it.

That completely changes the dynamic of your system so instead of replacing a pipe with a four or six-inch pipe, that’s there already, you might drop it down to two-inch with a system like that.

And instead of having fire-fighting you then say, “Hey, well, if you have a fire at your place then the tank will be the thing that will do that. You’ll pull the water out of the tank.” So you don’t have to maintain a fire main.

Those are really, really hard conversations for communities to have because it’s not the utility that’s the problem.

The problem is that the community is shrinking and declining and nobody likes it. The real estate values will be going down as a result. The services in the town – the shops and the supermarket or the mall will be closing up.

And it’s a symptom of a much wider problem. There’s no easy answers to it.